by Robert Wright

There are many hidden taxes built into the cost of your new home and renovation project. You may come up with some, but the others may come as a surprise.

The housing industry is one of the most heavily taxed industries. It is almost as high as the sin taxes. The ranking is generally, alcohol, smokes, gasoline, and housing. In some areas of Ontario it can reach 30% of the cost of a new home. So what makes up this level of taxation?

Of course you have the usual suspects: GST and PST; which make up 5% and approx. 3% to 4%, not much of the total. Where is the rest coming from?

Generally the remainder are more hidden. They include the payroll taxes – EI and CPP - paid by the builder, renovator, and subcontractors for the wages paid to their own employees; which are a relatively small percentage. You also have WSIB premiums paid for the same employees, which can range from 8.8% to 20% of the labour costs depending on the trade.

You also have tax costs imposed by the local level of government. You may know about building permit fees – which here in Ottawa are $12.50/$1000 of construction value. So you are paying taxes on taxes. Also, if you are in a rural area, you will be paying for approval of your well and septic system before your building permit is approved.

In addition, for new homes there are DC’s or development charges. These are fees levied by the city and school boards. These fees are supposed to help pay for the new infrastructure required by the new sub divisions. The reality of these fees is that they disappear into the coffers of the city and boards and end up paying for much more than the new development requirements.

The DC’s are by far the single largest fees charged to the cost of new homes and can be tens of thousands per home for the city and the school boards.

Renovations have almost all of these hidden tax costs. The only one they don’t have is development charges. The result of these hidden taxes and the other required costs carried by the professional and above board renovation contractor, is that up to 40% of the renovation costs are not for the work actually done in your home.

So you didn’t think your home was such a significant tax supporter of the governments, and that’s why the Canadian, provincial, and local home builder associations spend so much time with the politicians?  They are trying to improve the cost of owning and maintaining your home.

About the Author

Rob Wright has grown up around construction and in the mid 1990’s, Rob joined and took over Citadel Renovations in Ottawa. Rob has presented seminars at the local home shows on various renovations subjects and is a contributor to the Home Renovation Guide. Rob has been active in the Greater Ottawa Home Builders Association for many years and previously served as the Renovation Council Chair. For more information, visit CitadelRenovations.com.

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